A Firm Is Considering the Purchase of a Capital Good

question 76

Multiple Choice

A firm is considering the purchase of a capital good that will generate an additional $40,000 income each year for 4 years (after which time the capital good is useless and has no scrap value) . The interest rate is 4 percent. It follows that the firm should not purchase the capital good if its price is greater than (approximately)

• A)$135,800.
• B)$111,004.
• C)$160,200.
• D)$174,915.
• E)$123,318.

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Definitions:

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